ZuoTi.Pro
Question

The annual demand for a product is 64,000 items and the holding cost is $0.50 item/year. 1) What will be the Economic Order Q
business   Operations-Management   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

ANNUAL DEMAND = 64000
ORDERING COST = 250
HOLDING COST = 0.5

EOQ = SQRT(2 * ANNUAL DEMAND * ORDERING COST / HOLDING COST PER UNIT) = SQRT(2 * 64000 * 250 / 0.5) = 8000

2. REORDER POINT = DAILY DEMAND * LEAD TIME = (64000 / 300) * 9 = 1920

3. SAFETY STOCK = 150
STDEV OF DEMAND = 40
LEAD TIME = 9

Z = SAFETY STOCK / (STANDARD DEVIATION * SQRT(LEAD TIME)) = 150 / (40 * SQRT(9)) = 1.25
SERVICE LEVEL FOR A Z VALUE OF 1.25 = 0.894350226333145 OR 89%

4. DEMAND = 213.333333333333
STANDARD DEVIATION OF DEMAND = 40
SERVICE LEVEL = 98, WHICH GIVES A Z VALUE OF 2.05
LEAD TIME = 9
REORDER POINT = DEMAND * LEAD TIME + SAFETY STOCK
SAFETY STOCK = Z * STANDARD DEVIATION OF DEMAND * SQRT(LEAD TIME)

SAFETY STOCK = 2.05 * 40 * SQRT(9) = 246

REORDER POINT = (213.333333333333 * 9) + 246 = 2166

HOLDING COST OF SS = 246 * .5 = $123 FOR EACH ORDER
NO. OF ORDERS = ORDER FREQUENCY = DEMAND / EQQ = 64000 / 8000 = 8
= 123 * 8 = $984

** Leaving a thumbs-up would really help me out. Let me know if you face any problems.

0 0
Add a comment
Know the answer?
Add Answer to:
The annual demand for a product is 64,000 items and the holding cost is $0.50 item/year....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • An automobile manufacturer stocks a certain inventory item. The daily demand for the inventory item is...

    An automobile manufacturer stocks a certain inventory item. The daily demand for the inventory item is 20 units. The company estimates its annual holding cost for this item to be $10 per unit. The cost to place and process an order from the supplier is $200. The company operates 300 days per year, and the lead time to receive an order from the supplier is 3 working days on average. (a)    Find the economic order quantity. (b)    Find...

  • Question 29 3 pts Annual demand for an item is 13,000 units with the cost per...

    Question 29 3 pts Annual demand for an item is 13,000 units with the cost per unit at $243. The holding rate is 10% and the order cost is $12.00 per order. The standard deviation of daily demand is 3 units. Assume 260 days in the year and a lead-time of 2 days. If a service level of 97% is desired during the reorder interval, what is the safety stock required? (Note: Due to rounding and your exact choice of...

  • Item Cost: $8.00 Order Cost: $287 Annual Holding Cost: 33% of item cost Annual Demand: 27,400...

    Item Cost: $8.00 Order Cost: $287 Annual Holding Cost: 33% of item cost Annual Demand: 27,400 Average Weekly Demand: 548 Std. Dev. of Weekly Demand: 20/week Lead Time: 3 weeks Service Probability: 99% Previously found Info: Optimal order quantity = 2441 units. Reorder point = 1725 units. Annual Holding Cost: $3222.12. Annual Order Cost: $3221.55. Assume a price break of $55 per order was offered for purchase quantities of 2,500 or more units per order. If you took advantage of...

  • At a local hardware store, daily demand for winter tires is normally distributed with a mean...

    At a local hardware store, daily demand for winter tires is normally distributed with a mean of 50 tires and standard deviation of 20 tires. The source of supply is reliable and maintains a constant lead time of four days. The cost of placing the order is $20 and annual total holding costs are $1.00 per tire. Assume that the store operates 320 days a year and service level of 95%. Calculate the total holding cost (including the holding cost...

  • Compute the safety stock (S.S.) and reorder point (ROP) for the following situation: Annual Demand =...

    Compute the safety stock (S.S.) and reorder point (ROP) for the following situation: Annual Demand = 6570 units Unit Price = $11 and no quantity discounts Ordering Cost = $25/order Holding Cost = $1.50/unit Lead Time = 5 days Desired Customer Service Level = 97.5% Assume 365 days/year and that demand and lead time are constant. Safety Stock = 10; ROP = 90 Safety Stock = 0; ROP = 90 Safety Stock = 5; ROP = 150 Safety Stock =...

  • Annual demand for an item is 1,250,000 units. The holding cost rate is 20% of the...

    Annual demand for an item is 1,250,000 units. The holding cost rate is 20% of the item cost. Ordering costs are $4 per order. Quantity discounts are available according to the schedule below: Quantity Price per Unit ($) 1-999 1.15 1,000-2,499 1.10 2,500-4,999 1.08 5,000+ 1.05 What is the total annual cost of your policy? ~$1,313,949 ~$1,351,540 ~$1,377,276 ~$1,422,620 Assume 52 5-day weeks per year. If the lead-time is 1 weeks, what should the reorder point be? If necessary, round...

  • Your factory manufactures tricycles. You need to purchase front wheels from the supplier. The expected annual...

    Your factory manufactures tricycles. You need to purchase front wheels from the supplier. The expected annual demand (D) is 1300 units; the setup or ordering cost (S) is $8 per order, and the holding cost per unit per year (H) is $0.50.   Determine optimal number of wheels to order Determine the reorder point (ROP) (without safety stock) assuming that the lead time (L) is 4 days and your factory works 250 days a year. Based on your answer in (b),...

  • 5 points Consider an item with item cost 100. The cost per order is 75 and...

    5 points Consider an item with item cost 100. The cost per order is 75 and holding cost is 30% of the item cost. Daly demand is 10 units. The supplier takes 12 days to deliver the products. Assume that demand is constant. Also assume that working days in a year are 300 1. What shall be economic order quantity? 2. What shall be reorder point to run this inventory system? 3- What shall be total annual cost to run...

  • 17. (15 polnts) The daily demand for sunscreen at a drugstore is normally distributed with a mean...

    how do you get these answers? 17. (15 polnts) The daily demand for sunscreen at a drugstore is normally distributed with a mean of 18 bottles and a standard deviation of 4. They use a continuous review policy, where supplier lead time is a constant 5 days a Find the average and standard deviation of the demand over the lead time. Average Lead Time Demand (round to an integer) 94 SL Dev. of Lead Time Demand (round to b deinal...

  • ) The demand during the lead time is normally distributed with a méan of 40 and...

    ) The demand during the lead time is normally distributed with a méan of 40 and a standard deviation of 4. If they have calculated a reorder point of 46.60 units, what service level are they assuming? 9505 Service leve 2) The annual demand for a product has been projected at 2,000 units. This demand is assumed constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent purchase cost. The purchase cost...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT